Business Directories

Wet weather ends Australia sugar crush

Sydney, December 29, 2010

Australia's northeastern sugar cane-growing regions continue to be battered by torrential downpours which ended the harvest early, but wheat growers have some relief in sight as good weather ahead could quicken the pace of the delayed harvest.

This year's sugar and wheat crops have already suffered from excessive rain, attributed to the La Nina weather event, which slashed volumes or hurt quality. Further damage could squeeze already tight and sensitive commodity markets as Australia is a leading exporter of both crops.

Chicago Board of Trade wheat for March delivery rose to $8.02 per bushel during Tuesday's session, its highest price in five months, partly on Australian weather concerns.

Raw sugar futures closed at a 30-year high on tight supplies and fund buying in New York on Tuesday.

After the Christmas break brought heavy rain in much of the country, fine weather was expected across Australia's wheat-growing regions this week, which is likely to hasten the pace of the 2010/11 harvest.

Crop analysis firm Australian Crop Forecasters (ACF) estimates the harvest is now 75 per cent complete. Analysts expect the harvest could finish four to six weeks late and run until February as rain slowed progress.

"We should see a significant pick-up in the harvest over the next week," said Gavin Warburton, an analyst at ACF.

ACF expects a total harvest of 24.4 million tonnes but predicted that 10 million tonnes will be downgraded from high protein hard wheat and milling wheat to lower grades.

Last month ACF estimated the crop could be as much as 25.5 million tonnes, making it the largest crop since a record of 26.1 million tonnes was harvested in 2003/04.

"The reason for the downgrading is physical weather damage... basically a loss of area and a loss of test weight in the crop in eastern states," he said.

Western Australia, normally the country's top grain exporting state, is now expected to harvest around 4.0 million tonnes, slightly above recent forecasts but still down on the 8.2 million tonnes reaped last year.

"We were expecting a little bit less than we received," said Narelle Moore, technical marketing manager at Western Australia's biggest grain marketing firm, CBH Group.

She estimated there would around 4.3 million tonnes for export to customers in Asia and the Middle East.

"We've been talking to our customers about continuing to supply the quality and the quantity they're looking for, but when there's only around half what you normally produce you have to target the customers that always look to Western Australia," said Moore.

Australia's sugar crush is now completed with the final crush expected to be less that 27.5 million tonnes, the lowest since 1991, said Dominic Nolan, Chief Executive of the Australian Sugar Milling Council.

Earlier in the year, Nolan predicted around 32 million tonnes of cane was expected to be harvested, which was in line in a normal year.

Nolan said rain promoted growth of cane at the expense of sugar content, which meant around 3.6 million tonnes of raw sugar would be produced compared with 4.5 million tonnes last year.

"We had been expecting raw sugar revenue of around A$2 billion ($2.22 billion) but we're now expecting it to come in around $1.75 billion," Nolan said.

Australian sugar group Canegrowers last week predicted 18 per cent of the 2010 sugar crop has been left unharvested due to heavy rains that decimated growing regions. – Reuters